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About: UK Upstream Oil and Gas tax

The UK government is currently undertaking steps to simplify the existing oil and gas taxation regime that has become increasingly complicated due to the changes made to the oil tax provisions introduced in 1975.

Oil and gas companies are subject to two main elements: Corporation Tax (CT) and Supplementary Charge (SC). A third, Petroleum Revenue Tax (PRT), still exists but has been set at 0% with effect from 1st January 2016. A fourth, government royalty, was abolished with effect from 1st January 2003. A fifth, gas levy, is currently set at 0%.

Corporation tax (CT) is levied on the upstream profits of the company as a whole. After certain adjustments, these profits are also subject to Supplementary Charge (SC). Petroleum Revenue Tax (PRT) only applies in the context of obtaining refunds of tax previously paid.

The marginal rate of these taxes is currently at 40%. Prior to 1st January 2016 the rate was 75% for fields that were subject to PRT.

Non-residents with a presence in the UK are also subject to Corporation Tax on profits from exploration and exploitation activities in the UK or UK sector of the Continental Shelf at the normal CT rate which is 19%.

International Financial Reporting Standards (IFRS) provide the basis for financial reporting to the capital markets in an increasing number of countries around the world. However IFRS is a principles based framework and short on industry guidance, therefore Upstreamly are dedicated to looking at how IFRS is applied in practice by oil and gas companies, what the issues are and how to respond to various accounting challenges that these every changing IFRS create.

For more details, please contact us.